INTERIOR SECRETARY Donald Hodel is reported to be considering a policy reversal that would allow him to allocate hundreds of thousands of acre-feet of federal water to a powerful group of large agricultural producers in central California. A gift of water is the gift of wealth in the West, and this would be subsidized besides, meaning the government would sell it to the growers at cut rates and a loss. The decision is worth millions of dollars a year. The water at issue is about a fourth of the supply that is not under long-term contract and that is expected to be available for allocation in California over the next several years.

A solicitor of Interior in the Carter administration had said the growers were not legally entitled to the water. Both James Watt and William Clark, Mr. Hodel's predecessors, were asked to reconsider the solicitor's opinion earlier in this administration, and they declined. But the issue is now in court, and Mr. Hodel is said to be inclining toward a settlement largely in the growers' favor. Several members of Congress are trying to head him off; the House Appropriations Committee has added language to Interior's funding bill forbidding any action that lacks congressional approval. But it will be several weeks before that resolution is adopted. The administration is apparently free to act in the interim.

The growers involved are organized as the Westlands water district, the largest federally subsidized irrigation district in the country. When the district was set up in 1960, Congress authorized construction of impoundment, distribution and drainage facilities for 500,000 acres. For various reasons, no firm supply contract was ever signed, so that Interior delivered water to Westlands under year-to- year arrangements. In the mid-1970s Westlands annexed an additional 150,000 acres, and Interior began delivering water to these, too. Members of Congress quickly protested when they found out.

Westlands now buys its water for about $10 an acre-foot. Under one reading of the law, it has the right to this low price only so long as the water district stays in its original form. Thus its choice is to give up the annexed acres (which some critics argue it had no right to embrace anyway, since it lacked congressional approval) or to give up the $10 rate. It wants to keep both. The proposed settlement would apparently let it do so. It would have to pay a higher rate only for water used on the annexed land.

There is evidently great pressure on Mr. Hodel to agree to this. But -- as the earlier reactions of Mr. Watt and Mr. Clark suggest -- it would be a breach of trust to do so. There are established procedures now for the doling out of government water. To give in to Westlands would be to circumvent them and to acquiesce in the open arrogation of public resources for private gain. Don't do it, Mr. Secretary.